Investors May Be Moving to Physical Gold, Barclays Trader Says

Gold holdings in exchange-traded products are growing at a slower pace than in 2004-2009 because some investors may be moving to physical bullion after initial purchases of an exchange-traded fund, according to Barclays Plc. Gold holdings in ETPs have increased 9.6 percent this year to a record 2,582.98 metric tons, data compiled by Bloomberg show. They rose 7.9 percent last year and 19 percent in 2010. Growth in gold ETP holdings has exceeded 35 percent from 2004 to 2009, the data show. The following are comments from Cengiz Belentepe, head of industrial and precious metals trading at Barclays. He spoke in an interview Oct. 10:

“The question is whether the pace of buying has slowed, or whether the people have become a bit more sophisticated in recognizing the costs and liabilities.

‘‘We’ve seen instances of people coming in, whose first step is to buy an ETF, second step is to get educated on how the market works, third step -- I’m going to shift this in direct gold purchase and storage, fourth step -- let me allocate this metal into these locations. It’s the early step they are all migrating through, expressing the same view but in different ways.”

To contact the reporter on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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